Member Sign In

You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating indiv idual securities.

If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.

Bull of the Day: FormFactor (FORM)

FormFactor (FORM - Free Report) designs, develops, manufactures, sells and supports precision, high performance advanced semiconductor wafer probe cards. The California based company was founded in 1993 and has almost 1000 employees. FormFactor is ZacksRank #1 (Strong Buy) and todays Bull of the Day after an impressive earnings beat and multiple price upgrades.

FORM has a market cap of $700 Million with a Forward PE of 38. The stock has Zacks Style Scores of “D” in Value, but “A” in Momentum. The high PE is the reason for the Value score, but recent earnings momentum justifies the valuation.

In addition, the company also sits in an industry that is ranked 56 out of 265 (Top 21%) in the Zacks Industry Rank.

Industry strength

Looking at how the stock has performed against its peers we see that FormFactor has a way to go to catch its competitors. Although it has outperformed the S&P 500 over the last two years with a 47% gain versus 12.63% for the index.

Earnings

Q2 was reported on last Tuesday with the company beating by a penny, $0.13 versus the $0.12 expected. Revenue came above expectations at $83.1 Million verse $78 million. Q3 guidance was raised to $0.17-23 v $0.17 and revenue was hiked to $118-126 Million verse the $118 expected.

CEO Michael Slessor had some comments on the quarter: “"We are currently expecting strong second half performance in each of our businesses. We are enthusiastic about the Cascade product line-up's ability to expand our market share in the Foundry and Logic probe card business driven by secular trends in RF filter growth as well as continued strength at Form Factor’s historical Foundry and Logic customers. Our third quarter guidance includes the immediately accretive impact of Cascade, and we are confident that 2016 will be a solid growth year for FormFactor.”

Surprise History

Last quarters beat was the seventh out of the last eight months. Until lately, investors haven’t cared about EPS beats as the stock has chopped around between $6 and $9. However, this past beat there has been a move to 52-week highs and is ready to break higher.

Estimates

Looking at estimates going forward we see revisions to the upside across all timeframes. Over the last 30 days, estimates for the current year are up 36%, from $0.19 to $0.26. For fiscal year 2016, estimates have gone 20% higher, from $0.55 to %0.66.

Upgrades

Since earnings, we have seen some analysts come out with positive comments including Davidson reiterating their Buy rating and price target at $12, almost 20% higher from our target. B.Riley raised its price target to $13 from $11, citing improving demand and execution. Stifel added upgraded to $13 before earnings and now more confident that earnings accretion is likely to transpire as cost saving are implemented. Summit Redstone reiterated its $14 price target saying gross margins will improve over the next several quarters.

In Summary

FormFactor will not offer investors value. It will offer a chance to get in early on an early momentum breakout. The stock is giving investors a post earnings opportunity to get in on a pullback around the $10 area. Targets, according to analysts, could be taken for a potential 10-40% gain.

Note:Want more articles from this author? Scroll up to the top of this article and click the FOLLOW AUTHOR button to get an email each time a new article is published.

Now see our best long-term trades

As a Zacks Rank #1 Strong Buy, today's Bull of the Day has a short-term 1 to 3-month profit zone. But the Zacks Rank system also leads to long-term investments with double and triple-digit profit potential. Starting today, you can look inside our stocks under $10, home run, and value portfolios, plus more. Want a peek? Click here >>

Resources

Client Support

Follow Us

Zacks Research is Reported On:

Yahoo

MSN

Marketwatch

Nasdaq

Forbes

Investors.com

Morningstar

Zacks Investment Research is an A+ Rated BBB Accredited Business.

Copyright 2016 Zacks Investment Research

At the center of everything we do is a strong commitment to independent research and sharing its profitable discoveries with investors. This dedication to giving investors a trading advantage led to the creation of our proven Zacks Rank stock-rating system. Since 1988 it has nearly tripled the S&P 500 with an average gain of +26% per year. These returns cover a period from 1988-2015 and were examined and attested by Baker Tilly Virchow Krause, LLP, an independent accounting firm.

Visit performance for information about the performance numbers displayed above.